When Will Italian Borrowing Costs Fall Below US Ones?

The yield on an Italian 10-year bond is considerably higher, at
3.61%.

That huge gap would seem to make sense. After all, Italy has a
massive amount of debt, doesn't control its own currency, and its
government is ridiculously unstable.

But investors are rapidly abandoning the idea that any European
country will default. That story is fading into the past.

The new story is that Europe has Japan-like economic
characteristics; that growth and inflation are falling, and that
the ECB isn't doing much about it. Furthermore, Italy is seen as
being an exceptionally problematic country economically, with
characteristics much worse than the US'. If you completely took
credit risk off the table, Italy should probably have lower
borrowing costs than the US based on the fundamentals of their
respective economies.

So watch this spread. It's already narrowed a ton. If the US
economy accelerates, and interest rates rise, and Italy continues
to sink deeper into the muck, it would not be surprising to see
Italy borrow at a lower level than the US at some point in the
not-so distant future.